Credit-card issuers have been decreasing credit limits, hiking rates, and tightening credit card standards in the current credit crunch following the sub-prime meltdown.
Card issuers began tightening standards in January, when 10 percent reported some form of credit tightening. The pace picked up in April, tripling to 30 percent, before doubling once more in July.
Lenders have lowered credit limits on credit card accounts and increased interest rate spreads on consumer loans other than credit card loans over the past four months.
Those who have bad credit or are looking to establish credit have to face the fact that terms will be worse than they were at the start of the year. Folks with good credit scores and solid credit histories are now getting caught in the fray as they may see their limits trimmed or rates raised.
Smaller credit lines spell trouble for consumers on several fronts. Lower credit limits shrink consumers’ ability to spend. And should an emergency arise, consumers will have less credit to cover those costs. Consumers also could trigger penalties for going over a newly lower limit.
Wise card shopping means quick card shopping. Stretched-out card shopping, where you apply for one card after another, is seen as an act of desperation by credit score formulas and will take points off on your credit score, making matters worse.
